Bangladesh Bank on Sunday asked commercial banks to bring down the credit growth in line with their deposit growth by June.
The central bank warned the banks that it would take stern actions against them if they failed to adjust the credit-deposit ratio.
Currently, the credit and deposit growths of the commercial banks are 29 per cent and 22 per cent respectively which reflects a seven per cent gap between credit growth and deposit growth.
Bangladesh bank executive director SK Sur Chowdhury said that when credit-deposit ratio (CDR) went abnormal it became risky for the banks and their clients. ‘That’s why the BB in last three months intervened two times asking the banks to reduce their credit growth’.
At a meeting with the chief executive officers of 26 commercial banks including Dhaka Bank, Commerce Bank, Jamuna Bank, Pubali Bank, National Credit and Commerce Bank, Basic Bank, Eastern Bank, Dutch-Bangla bank, United Commercial Bank and National Bank, the central bank deputy governor Nazrul Huda asked them to match their credit growth and deposit growth.
BB executive director SK Sur Chowdhury said that the central bank would not allow any branch expansion, renewal of the services of the banks’ CEOs and reduce CAMEL rating if the banks fail to follow the direction and this would be the last warning.
He said BB called the meeting when they found a mismatch in the commercial banks’ profile due to excessive credit growth.
The BB official said for the last couple of months credit growth excessively increased for the demand of capital market investors which led to the volatility of call money market.
At the meeting, the conventional commercial banks were also asked to reduce their investment to 85 per cent of their total deposit and Islamic banks to 90 per cent.
A central bank source said the conventional banks are allowed to invest 81 per cent of their total deposit and the rest 19 per cent must be deposited in the central bank as statutory liquidity ratio while rates for Islamic banks are 89 per cent and 11 per cent respectively.
Courtesy of New Age
